Steve Wozniak, the hardware brains behind Apple’s meteoric rise to prominence is not known for playing the role of critic. But last August, Wozniak was quoted making statements that “cloud computing was going to be very problematic in the next five years.”

Business insider has more:

“The Apple cofounder slammed cloud computing during a Q&A after a recent performance of The Agony And The Ecstasy of Steve Jobs, the controversial play by Mike Daisy.

"I really worry about everything going to the cloud," Wozniak told the audience, according to a transcript from Agence France-Presse. "I think it's going to be horrendous. I think there are going to be a lot of horrible problems in the next five years."

Wozniak didn't offer much in the way of specifics about what these "horrible problems" would be, but he did hint at concerns about signing away rights to digital property stored in the cloud and generally losing ownership of that property.” Read Story

While this media flurry happened nearly a year ago, I’m bringing it up again because it’s important not to get distracted by the latest blinking light. Is there anything to Woz’s concern?

The short answer is definitely yes. So let me offer a few specifics.

Bear in mind that I am not slamming cloud computing. What I’m hoping to illustrate is how the cloud is organized in a way that is contrary to the property rights of businesses and consumers. It think it is a market opportunity.

Problem 1: Possession

In a legal sense, possession of one’s property is considered to be 9/10ths of the law. If your data is in possession of a service provider in the cloud, it’s clear that they own access to your data. They might not claim ownership (though some agreements come close), but they are definitely the “bouncer at your data bar” and Bruno doesn’t report to you.

If they are the gatekeeper, they get to decide who sees your data. You might not care, but most businesses do care. So why are businesses giving the cloud a pass here?

Problem #2 Business Privacy

Kaliya Hamlin, an internet privacy and data rights expert recognized by the World Economic Forum has stated on many occasions that “user’s data, and data about them, belongs to them.” While her focus in on the end user, the same or even bigger case applies to businesses, yet we do not see a business records privacy initiative... How come? Even HIPPA, designed to protect patients, doesn’t protect businesses. Is that a double standard? Are you really a “private business” if you are storing your data on a public cloud?

I was working on a project once and a colleague at a major cloud company called me and told me that his company had no problem with what my client was doing, even though nothing had been publicly announced and little communicated about it. The data was stored in the cloud.

Problem #3 Governance Structure

As I’ve said before, governance sounds like one of those IT terms that appears every few years, with conferences and marketing fashions, and then when the hype value wears off it continues to exist like a brown dwarf star, bright enough to be seen, but not hot enough to heat much of anything.

But governance standards in the cloud are horrendous. Whereas in your firm, you have the ability and the process to act decisively. But your governance structure does not extend into the clouds outside of your control. Yes, Yes, I hear you. We have master accounts. Well, I’m here to tell you, that does not matter much when your master is not available.

Corporate governance structures need to be reflected in IT hosted services exactly as they are represented in the corporate governing structure.. I think that someone should create a standard for IT hosted services governance to encourage hosting companies to create a governance layer separate from their account management frameworks.

That way, in a pinch, the customer can act to protect themselves and to gain control over their externally managed business processes. I’m talking everything from highly-reputable hosting services like RackSpace to crisp backup services such as Carbonite. I’m not singling them out. But I use them and I know what they have. This is an industry wide problem. If someone starts something to solve this, let me know.

Problem #4 Event-Management Process

In addition to governance, possession and privacy, the next problem is matching corporate governance process with hosted-service processes. Sad to say, most IT shops do not know how their crisis management process jives (if it exists) with the crisis management at the hosting provider. This should be a part of every risk management team in every company.

Problem #5 Conflation

Conflation occurs when a problem in one area affects unrelated areas. So let’s say that your accounting department is having a problem with your hosting company and doesn’t tell anyone. All of a sudden your users can’t access the CRM or email. One thing that larger companies can do is to write custom contracts that prevent conflation. Smaller companies will only be ok when industry leadership steps up and delivers a solution. Or better yet, a competitor steps up and changes the market. You can do it.

The way that the cloud is organized today, conflation is the order of the day, and hosting providers gain enormous sway over your property that they can use to act against a client for even unintentional non-compliance.

Summing It

Regardless of how you feel about how the Wizard of Woz coming forward and letting us know his heartfelt concerns last summer or if you even remember. Most of us have become mainframe users again, only this mainframe lives “in the cloud.” And it’s someone else’s mainframe. Pay attention to your elders.